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Foolish Forecast: MarineMax to Sink or Swim?

Views you can use to get clues on tomorrow's news.

Well, it was bound to happen. With the entire boating industry still in disarray, boat retailer extraordinaire MarineMax (NYSE:HZO) up and reported a loss last quarter -- the first time that's happened in four years. Hopefully, when it reports its Q2 2007 numbers tomorrow, the company can put this distasteful event behind it as immediately, and for as long a term, as it did before.

Earnings. Analysts see profits falling substantially year over year to only $0.10 a share.

What management says:Just two weeks ago, MarineMax came out with its earnings guidance for the rest of this fiscal year. It was, if you'll forgive the expression, a shipwreck. Previously expecting to earn $1.40 to $1.50 per share, the retailer now expects to deliver just $0.45 to $0.65. Also, MarineMax is looking for same- store sales to be flat or, at best, in the low single digits.

Drawing our eyes back from the horizon to the wake, MarineMax suggested that in Q2, it most likely booked $326 million in sales and experienced same-store sales growth of 2%. "Due to increased pricing pressure and increased costs incurred to generate the company's sales," however, "operating margins were negatively impacted."

What management does:I have to point out that these numbers, if they appear as predicted, will be a far cry from what CEO William McGill had predicted just a few months ago, namely same-store sales growth in the mid-single digits for the year. Considering that the firm posted 14% comps in Q1, and expects 2% comps in Q2 to slow down to perhaps flat comps for the year, means we almost certainly must expect negative same-store sales in the second half.

That's likely to cause inefficiencies in the firm's operations, which will in turn draw out the downward trends in margins that re-emerged last quarter:

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:While investors are undoubtedly displeased with MarineMax's sinking earnings, they can perhaps take some degree of solace in that the entire sector seems to have run up on a sandbar. Peers Marine Products (NYSE:MPX) and Brunswick (NYSE:BC) are also badly trailing the market over the past six months, though not nearly as much as MarineMax, which has been taking on water since lower guidance was issued recently.

Those considering an investment in MarineMax may want to steer for calmer waters, as the company is likely to continue to give its shareholders a choppy ride over the short term. Still, I think that if the company is able to begin to show some signs of a turnaround over the next couple of quarters, the company's shares could become, shall I say, buoyant?

Marine Products is a Motley Fool Hidden Gems pick. Interested in outstanding small-cap stocks flying under the market's radar? Join Tom Gardner and other investors on the Hidden Gems discussion boards -- available for 30 days with a free trial.

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I like things that go "boom." Sonic or otherwise, that means I tend to gravitate towards defense and aerospace stocks. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well. Follow me on Twitter or Facebook for the most important developments in defense & aerospace news, and other great stories besides.